Shatner: “Here’s my premise, and you agree with it or not. If you have money,
you are going to get health care. If you don’t have money, it’s more difficult.”

Limbaugh: “If you have money you’re going to get a house on the beach. If you
don’t have money, you’re going to live in a bungalow somewhere.” ... “What’s the
difference?”

Shatner: “The difference is we’re talking about health care, not a house or a
bungalow.”

Limbaugh: “No. No. You’re assuming that there is some morally superior aspect
to health care than there is to a house. …”

One must wonder whether physicians, nurses and other workers toiling day and
night in health care — let alone the medics and helicopter pilots who risk their
lives to help the wounded — see their work and its product quite as Mr. Limbaugh
casts it. One further wonders whether families with a cancer-stricken member are
likely to view going without health care as the moral equivalent of going
without a beach house.

But leaving aside speculation on the moral dimensions of health care..., it
should be noted that economists, too, have long wrestled with the question of
whether health care stands apart from other goods and services traded in the
market place. ...

To lay down a standard to which to compare the health care sector, Professor
Arrow explained first on what basis economists consider a perfectly competitive
market for some good or service as “maximizing human welfare,” an outcome
economists describe as “efficient.” ... If those and some other conditions are
met, Professor Arrow explained, then for any given initial distribution of
income and wealth that market will settle down at a unique equilibrium... This
equilibrium has important attributes.

First, in what Professor Arrow calls the
First Optimality Theorem of welfare economics, it can be shown that in this
equilibrium ... it would be impossible through any reallocation to make someone
happier without making someone else less happy. It is an allocation that
economists call Pareto efficient... For any given initial distribution of income
and wealth, economists declare the associated Pareto-efficient allocation ... to
be “welfare-maximizing”...

Second, and very importantly, in what Arrow calls the
Second Optimality Theorem, he explains that if on ethical grounds society
wished to distribute a good or service (for example, education or health care or
food or beach houses) among people in a particular way — like egalitarian
principles — it need not have government directly involved in producing or
distributing that good or service. The desired distribution could be attained by
redistributing income and wealth among the citizenry in a way that would drive
the perfectly competitive private market to achieve the desired allocation of
the good or service among the people. Better still, it would do so in the
welfare-maximizing way predicted by the First Optimality Theorem.

It is easy to see why Professor Arrow’s paper fired the imagination of
generations of economists ... in their argument that public health policy should
confine itself strictly to making the market of health care perfectly
competitive and then to redistribute income — perhaps by means of tax-financed
vouchers to help subsidize the purchase by poorer people of needed health care —
in order to achieve whatever distributive ethic society wishes to impose on
health care. That free-market approach would automatically take care of whatever
moral aspect society wishes to impute to health care.

Having established this normative benchmark, Professor Arrow explored in the
rest of his paper how close the market for health care actually comes to the
characteristics of a perfectly competitive norm. In my next post, I will discuss
Professor Arrow’s conclusion.

Can you guess what that conclusion will be? These markets are far from the competitive ideal, and conditions such as customers having full knowledge about the relative quality of products in the market will be hard to satisfy in any case.

Shatner: “Here’s my premise, and you agree with it or not. If you have money,
you are going to get health care. If you don’t have money, it’s more difficult.”

Limbaugh: “If you have money you’re going to get a house on the beach. If you
don’t have money, you’re going to live in a bungalow somewhere.” ... “What’s the
difference?”

Shatner: “The difference is we’re talking about health care, not a house or a
bungalow.”

Limbaugh: “No. No. You’re assuming that there is some morally superior aspect
to health care than there is to a house. …”

One must wonder whether physicians, nurses and other workers toiling day and
night in health care — let alone the medics and helicopter pilots who risk their
lives to help the wounded — see their work and its product quite as Mr. Limbaugh
casts it. One further wonders whether families with a cancer-stricken member are
likely to view going without health care as the moral equivalent of going
without a beach house.

But leaving aside speculation on the moral dimensions of health care..., it
should be noted that economists, too, have long wrestled with the question of
whether health care stands apart from other goods and services traded in the
market place. ...

To lay down a standard to which to compare the health care sector, Professor
Arrow explained first on what basis economists consider a perfectly competitive
market for some good or service as “maximizing human welfare,” an outcome
economists describe as “efficient.” ... If those and some other conditions are
met, Professor Arrow explained, then for any given initial distribution of
income and wealth that market will settle down at a unique equilibrium... This
equilibrium has important attributes.

First, in what Professor Arrow calls the
First Optimality Theorem of welfare economics, it can be shown that in this
equilibrium ... it would be impossible through any reallocation to make someone
happier without making someone else less happy. It is an allocation that
economists call Pareto efficient... For any given initial distribution of income
and wealth, economists declare the associated Pareto-efficient allocation ... to
be “welfare-maximizing”...

Second, and very importantly, in what Arrow calls the
Second Optimality Theorem, he explains that if on ethical grounds society
wished to distribute a good or service (for example, education or health care or
food or beach houses) among people in a particular way — like egalitarian
principles — it need not have government directly involved in producing or
distributing that good or service. The desired distribution could be attained by
redistributing income and wealth among the citizenry in a way that would drive
the perfectly competitive private market to achieve the desired allocation of
the good or service among the people. Better still, it would do so in the
welfare-maximizing way predicted by the First Optimality Theorem.

It is easy to see why Professor Arrow’s paper fired the imagination of
generations of economists ... in their argument that public health policy should
confine itself strictly to making the market of health care perfectly
competitive and then to redistribute income — perhaps by means of tax-financed
vouchers to help subsidize the purchase by poorer people of needed health care —
in order to achieve whatever distributive ethic society wishes to impose on
health care. That free-market approach would automatically take care of whatever
moral aspect society wishes to impute to health care.

Having established this normative benchmark, Professor Arrow explored in the
rest of his paper how close the market for health care actually comes to the
characteristics of a perfectly competitive norm. In my next post, I will discuss
Professor Arrow’s conclusion.

Can you guess what that conclusion will be? These markets are far from the competitive ideal, and conditions such as customers having full knowledge about the relative quality of products in the market will be hard to satisfy in any case.